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A Different Banking Culture – Saudi Arabia

A Different Banking Culture – Saudi Arabia

The stumbling loans in Saudi Arabian banks in the end of 2017 hit 20.40 billion SR in comparison to 2016 which was 17.66 billion SR. That means the stumbling loans growing 16% which is approximately a 2.75 billion SR increase according to Aleqtisadiah newspaper. Therefore, the main financial delinquency in Saudi Arabia is the stumbling loans.


Years ago, Saudi banks worked on this situation hand in hand with Saudi courts and are trying to figure out some procedures to decrease that number which could affect banks’ activity as much as Saudi finances. The starting point was when banks added their stumbling loan clients in SIMAH, the Saudi Credit Bureau. That means if a client is added in this list, there is no way to have financial support from any bank. The second step is that they have third party agents trying to call the client to find a way that accepted both the bank and the client to pay the installment. If there is no pledge from the client, the bank uses the power of the court.


But we should also consider that the Saudi government is an e-government. Therefore, there is a tool that only the court is able to use. In short, everyone that lives in Saudi has an online e-government account which is linked to several e-services that may be provided to that person online. Therefore, if anyone has a case in court and ignores it, the court has the power to block his e-government account which means no e-services will be provided until the court unblocks this account. Consequently, banks send financial delinquency cases to the court as a final solution because this solution is a tool, not a penalty. And most clients don’t want to face this issue.

 

Nowadays, the news says that the banks will wait 15 days before they give you a loan because they want to check more about your financial cases and how much money you spend per month. Also, they want to check if you are single or married, if you have children … etc. Thus, it’s a reverse relation. The more your family members,  the lower the loan budget. This new rule will start in a few months.  


On the other hand, the Saudi Arabian credit card culture is way different from the American credit card culture. The reason for that is the fees that are added when a client has late debt. So, because of Islamic financial rules, fees are not allowed to be added. The majority of people avoid these kinds of credit cards. The common type of credit card here is a top-up credit card which means that you need to transfer money into this card. Then you are able to use it.

 

– Abdul Alshaya

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